“Haworth & Lexon Law Newsletter ” is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, E-commerce, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.

Guidelines:

Latest Laws and Regulations:

Social Insurance Law.

The Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China.

Measures for Supervision and Handling of Contract-related Violations.

Regulations of the Supreme People’s Court on relevant Issues regarding Application of Law in Trial of Tourism-related Case.

The Interpretation of the Supreme People’s Court of Several Issues on the Specific Application of Law in the Trial of Cases about Counterfeiting Currency (II)

Notice on Further Regulating Purchase of Housing by Foreign Institution and Individuals.

Notice of the State Administration of Foreign Exchange on Relevant Issues concerning Strengthening the Administration of Foreign Exchange Busines.

Announcement on the Treatment of Enterprise Income Tax on Income obtained by the Enterprise from Transfer of Assets.

Administrative Measures of the Customs of the People’s Republic of China for Inward and Outward Means of Transport.

Decision on Amending the Measures of the Customs of the People’s Republic of China on the Control of Processing Trade Goods (II)

Notice of Shenzhen Stock Exchange on Further Regulating the Purchase and Sale of Shares of Listed Company on the Secondary Board by its Director, Supervisor and Senior Managers.

Interim Measures of Shanghai Municipality for the Administration of Startup Investment Guidance Funds.

Latest Laws and Regulations

Social Insurance Law

The Social Insurance Law was promulgated by the Standing Committee of the National People’s Congress on October 28, 2010, which shall come into force on July 1, 2011.

According to the Social Insurance Law, the state shall establish a social insurance system including basic endowment insurance, basic medical insurance, employment injury insurance, unemployment insurance and maternity insurance to guarantee the rights of citizens to legally obtain material assistance from the state and society in case of old age, illness, work-related injuries, unemployment and childbirth.

Employees shall participate in the basic endowment insurance and medical insurance, and the basic endowment insurance and medical insurance premiums shall be jointly paid by employers and employees. Individual industrial and commercial households without employees, part-time employees not participating in the basic endowment insurance or medical insurance, through their employers and other persons in flexible employment may participate in the basic endowment insurance and medical insurance, but shall pay the basic endowment insurance and medical insurance premiums themselves.

Any individual participating in the basic endowment insurance shall receive a monthly basic pension provided that he/she has contributed premiums for a cumulative period of 15 years or more when he/she reaches the statutory retirement age. Where an individual is employed in a different overally-planned area, his/her basic endowment insurance relationship shall be transferred with him/her, and the contribution period shall be calculated on a cumulative basis. In addition, the state shall establish and improve a new-type social endowment insurance system for rural areas.

With regard to the medical insurance, the combination of personal contributions and government subsidies shall apply to the basic medical insurance for urban residents. For persons enjoying the minimum living safeguard, the disabled persons who have lost the ability to work and the seniors aged over 60 years and minors of low-income families, their personal contributions shall be subsidized by the government. Medical expenses in conformity with the drug catalogue, diagnosis and treatment items and medical care service facilities standards for the basic medical insurance and medical expenses for emergency treatment or rescue shall be paid from the basic medical insurance funds according to the relevant provisions of the state. The following medical expenses shall not be included in the payment scope of the basic medical insurance funds: (1) expenses payable from the employment injury insurance funds; (2) expenses to be assumed by a third party; (3) expenses to be assumed by the public health; and (4) expenses for overseas medical treatment. Where the medical expenses shall be assumed by a third party in accordance with law, but the third party fails to pay or cannot be determined, the medical expenses shall be prepaid from the basic medical insurance funds. The basic medical insurance funds shall be entitled to be reimbursed by the third party after prepayment.

As to the employment injury insurance, it is provided that employees shall participate in the employment injury insurance, and the employment injury insurance premiums shall be paid by their employers rather than the employees. Where an employee injured by an accident arising from work or suffering any occupational disease is determined to have suffered an employment injury, he/she shall enjoy the employment injury insurance benefits. In particular, if he/she has lost the ability to work according to the result of a work ability appraisal, he/she shall enjoy the disability benefits. The medical expenses and rehabilitation expenses for the treatment of employment injuries, the food subsidies for hospitalization, the travel, room and board expenses for medical treatment outside an overally-planned area, the expenses necessary for installing and equipping the insured with disability assisting devices etc. incurred from employment injuries shall be paid from the employment insurance funds in accordance with the relevant provisions of the state. Wages and welfares during the medical treatment of work-related injuries, the monthly disability allowance received by the disabled employees at the fifth and sixth grade of disability, and the lump-sum disability employment subsidy enjoyed when the employment contract is terminated or rescinded shall be paid by employers.

In terms of unemployment insurance, employees shall participate in unemployment insurance, and unemployment insurance premiums shall be jointly paid by employers and employees in accordance with the relevant provisions of the state. Where an unemployed person meets the following requirements, he/she may receive unemployment insurance money from the unemployment insurance funds: (1) before he/she becomes unemployed, his/her employer and he/she have paid the unemployment insurance premiums for one year or more; (2) his/her employment is discontinued against his/her will; and (3) he/she has performed unemployment registration and filed a job application. An unemployed person may receive unemployment insurance money for 12 months at most if his/her employer and he/she have paid premiums for a cumulative period of not less than one (1) year but less than five (5) years before he/she becomes unemployed; or for 18 months at most if his/her employer and he/she have paid premiums for a cumulative period of not less than 5 years but less than 10 years; or for 24 months at most if his/her employer and he/she have paid premiums for a cumulative period of not less than 10 years. Where he/she becomes unemployed again after another employment, the period of premium payment shall be calculated anew, and the period for receiving unemployment insurance money shall be calculated by including the period in which the unemployment insurance money receivable has not been received during the previous unemployment, but shall not exceed 24 months at most.

With regard to maternity insurance, employees shall participate in maternity insurance, and the maternity insurance premiums shall be paid by employers rather than employees in accordance with the relevant provisions of the state. Under any of the following circumstances, an employee may enjoy maternity allowances in accordance with the relevant provisions of the state: (1) the employee is a female employee enjoying maternity leave; (2) the employee is enjoying the leave for birth control surgery; or (3) other circumstances as prescribed by laws and regulations.

Foreigners employed within the territory of the People’s Republic of China shall participate in social insurance analogically in accordance with this Law, which is not clear whether it is mandatory or voluntary (please refer to the part of Lawyers’ Practice in this Issue for details).

The Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China

The Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China was promulgated by the Standing Committee of the National People’s Congress on October 28, 2010 (hereinafter, “Application of Law”), which shall come into force on April 1, 2011.

According to the Application of Law, the laws of China shall apply in the following cases: if the application of foreign laws will damage the social public interests, the laws of China shall apply. If there are mandatory provisions on foreign-related civil relations in the laws of the People’s Republic of China, these mandatory provisions shall directly apply.

The principle of autonomy of will is primary, and pursuant to the Law the parties may explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law. In addition to the traditional contract area, the parties may choose the applicable laws by agreement in such areas as agency, trust, marital property relationship, real right of movables in transportation, choice of laws on general tort liability or IP infringement liability by parties after infringement happens, unjust enrichment and gestio, and transfer and license of IP. The Doctrine of the Most Significant Relationship is an important principle in this Applicable of Law: If there are no provisions in this Law or other laws on the application of any laws concerning foreign-related civil relations, the laws which have the closest relation with this foreign-related civil relation shall apply. The parties concerned may choose the laws applicable to contracts by agreement. If the parties do not choose, the laws at the habitual residence of the party whose fulfillment of obligations can best reflect the characteristics of this contract or other laws which have the closest relation with this contract shall apply.

Many provisions of the Applicable of Law reflect the protection of the relevantly weak party: with regard to relationship between parents and kids, if there is no mutual habitual residence, the laws in favor of protecting the rights and interests of the weak in the laws at the habitual residence or of the state of nationality of one party shall apply (Article 25). The laws at the habitual residence of consumers shall apply to consumer contracts, and the laws at the working locality of laborers shall apply to labor contracts, and the laws at the habitual residence of the infringed shall apply to product liabilities etc.

Measures for Supervision and Handling of Contract-related Violations

The State Administration for Industry and Commerce promulgated the Measures for Supervision and Handling of Contract-related Violations (hereinafter “Measures”), which came into force as of November 13, 2010.

The contract-related violations shall refer to the violations of laws, regulations and these Measures by natural persons, legal persons and other organizations through contracts for illegal benefits.

Anybody shall not commit any of the ten kinds of frauds through a contract, involving falsifying a contract, providing any false security, releasing or using false information to seduce another person into concluding a contract, fabricating a cause to suspend (or terminate) a contract to cheat another person of property, etc.

Where a business operator and a consumer adopt standard clauses in concluding a contract, the business operator shall not exempt itself from the relevant liabilities in the standard clauses, such as the liability for any personal injury to the consumer, the liability for the consumer’s property loss caused deliberately or for gross negligence, and the liability legally assumed for breach of contract; Neither shall the business operator increase the liabilities of the consumer in standard clauses, such as setting an amount of liquidated damages or compensatory damages which exceeds the statutory or reasonable amount, requiring the consumer to assume any operational risk that shall be assumed by the provider of the standard clauses, or imposing on the consumer any liability that shall not be assumed by the consumer in accordance with laws and regulations. In addition, the business operator shall not exclude the following rights of the consumer in the standard clauses: the right to modify or rescind the contract in accordance with law, the right to claim for payment of liquidated damages, the right to claim for compensation for damages, the right to interpretation of the standard clauses, the right to lodge a lawsuit for disputes over the standard clauses, and other rights enjoyed by the consumer in accordance with law.

Regulations of the Supreme People’s Court on relevant Issues regarding Application of Law in Trial of Tourism-related Case

Regulations on relevant Issues regarding Application of Law in Trial of Tourism-related Case were promulgated by the Supreme People’s Court on November 1, 2010, which came into force on the promulgation date (hereinafter, “Regulations”). For any case which have been finally tried before the promulgation and of which the parties apply for re-trial or which is re-tried according to the trial supervision procedures after the promulgation of the Regulations, these Regulations shall not apply.

Tourism-related dispute shall refer to the contract dispute or tort dispute between tourists and tour operators and assistant tour service providers for tourism. For any dispute between tourists and operators of the tourist attractions during self-service travelling, these Regulations shall analogically apply. If a tourism contract is executed between an entity or family as a group and the tour operator, the dispute arising from the tourism shall be filed by the group as a contract party, or the tourist himself regarding the tourism contract dispute. If the same reason attributable to the tour operator causes personal injury or asset loss to the tourist, the tourist may claim the tourist operator to be liable in contract or tort, and the court shall try the case according to the cause of action selected by the parties.

If the tour operator or assistant tour service provider fails to fulfill the security obligation which causes personal injury or assets loss to the tourists, and the tourists claim that the tour operator or assistant tour service provider shall be liable, the court shall support that claim. If the personal injury or asset loss of the tourists is caused by a third party, the third party shall be liable, unless the tour operator or assistant tour service provider fails to fulfill the security obligation. If the tour operator or assistant tour service provider discloses or makes the personal information of the tourist in public without the consent of the tourist, and the tourist requests to pursue its liability, the court shall support it.

If the tourism contract can not be performed for objective reasons which can not be attributable to the tour operator or assistant tour service provider such as force majeure, and the tour operator or assistant tour service provider requests termination of the contract, the court shall support it. But the court shall not support the claim by the tour operator or assistant tour service provider that the other party shall assume the liability for breach of contract. The court shall support the claim of the tourist for refund of the expenses which have not happened. Unless it is otherwise agreed in the contract, if the contract can not be performed because of the delay of the public passenger transportation vehicles, such as airplane, train, regular steamship, and intercity bus, and the tourist claims for refund of the expenses which have not happened, the court shall support the claim.

If the luggage kept by the tour operator or assistant tour service provider for the tourists is damaged or lost and the tourist claims for compensation, the court shall support the claim, unless:

the loss is caused because the tourists fail to follow the prior statement or hint of the tour operator or assistant tour service provider and carry around cash, negotiable securities and valuables;

the loss is caused by force majeure event or accident;

the loss is caused through the fault of the tourists;

the loss is caused by the natural properties of the goods.

The Interpretation of the Supreme People’s Court of Several Issues on the Specific Application of Law in the Trial of Cases about Counterfeiting Currency (II)The Interpretation of Several Issues on the Specific Application of Law in the Trial of Cases about Counterfeiting Currency (II) was promulgated by the Supreme People’s Court on October 20, 2010 and came into force as of November 3, 2010. Before this, the Supreme People’s Court had promulgated the Interpretation of Several Issues on the Specific Application of Law in Handling such Crimes as Counterfeiting National Currency, Trafficking Fake National Currency or Smuggling Fake Currency, and the Interpretation of Several Issues on the Specific Application of Law in the Trial of Cases about Counterfeiting Currency in 1994 and 2000 respectively.

The activity to illegally make fake currency by copying the pattern, shape and color of real currency and use it as real currency shall be recognized as “counterfeiting the currency” as provided in Article 170 of the Criminal Law. The activity to cut and paste, dig and repair, uncover the layer, alter, change the place, re-print or use other means to process and dispose of the real currency, and thereby change the shape, pattern and value of the real currency shall be recognized as “altering the currency” as provided in Article 173 of the Criminal Law. The activity to make real-fake mixed currency by means of counterfeiting and alteration at the same time shall be punished under the crime of counterfeiting currency according to Article 170 of the Criminal Law.

Notice on Further Regulating Purchase of Housing by Foreign Institution and IndividualsThe Notice on Further Regulating Purchase of Housing by Foreign Institution and Individuals (hereinafter “the Notice”) was promulgated by the Ministry of Housing and Urban-Rural Development and the State Administration of Foreign Exchange on November 4, 2010.

The Notice has mainly provided that:

Any foreign individual is only allowed to buy one unit for self-residence. Foreign institutions that have set up branches or representative offices in the mainland of China are only allowed to buy non-residential premises at the registration city.

When registering the pre-sale contract of commercial dwelling and the ownership of such dwelling, the house administration department shall, apart from examining the materials required by the Measures for the Management of Pre-Sale of Urban Commercial Dwelling and the Measures for Housing Registration and verifying the dwelling held by the purchaser, inspect and examine the approval documents and registration certificate issued by the competent administration departments concerning the branch or representative offices set up in the mainland of China, and the written promise of the foreign institution that the housing is bought for office purpose only.

Notice of the State Administration of Foreign Exchange on Relevant Issues concerning Strengthening the Administration of Foreign Exchange Busines

The Notice on Relevant Issues concerning Strengthening the Administration of the Foreign Exchange (hereinafter “the Notice”) was promulgated by the State Administration of Foreign Exchange on November 9, 2010 and came into force as of the date of promulgation.

The Notice provides that the former provisions shall be nullified that “if any time lag in export data transmission results in temporary inadequacy of the balance of receivable foreign exchange of an enterprise, the bank may, upon the strength of the enterprise’s commitment letter, settle or transfer in advance the foreign exchange fund through the account to be inspected for the enterprise”, and the bank shall, in accordance with the balance of receivable foreign exchange of enterprises, settle or transfer the foreign exchange fund through the account to be inspected within the quota. The rate of receivable foreign exchange for export under the processing trade with imported materials shall be uniformly adjusted from 30% to 20%, if the rate of actually-collected foreign exchange for a single declaration form of exported goods under the processing trade with imported materials is higher than 20%, the bank shall deal with it under the relevant current provisions regarding the collection of foreign exchange in excess of the prescribed rate for export under the processing trade with imported materials.

Management of capital contributions made by foreign investors to foreign-funded enterprises shall be strengthened. If the actual payer is inconsistent with the foreign investor of a foreign-funded enterprise, the foreign-funded enterprise shall, when authorizing a CPA firm to go through the confirmation request formalities for capital verification at the foreign exchange authority, submit the relevant notarized certificate of capital contribution on commission.

In case of settlement of foreign exchange for the funds raised from overseas listing after they are transferred back, it is necessary to provide the relevant materials according to the relevant foreign exchange management provisions on settlement of foreign exchange capital of foreign-funded enterprises. The settlement of foreign exchange shall conform to the uses listed in the prospectus, and for the settlement of funds over-raised or beyond the uses as listed in the prospectus, the resolution of the board of directors relevant to the uses of foreign exchange settlement shall be submitted separately.

Announcement on the Treatment of Enterprise Income Tax on Income obtained by the Enterprise from Transfer of Assets

The Announcement on the Treatment of Enterprise Income Tax on Income obtained by the Enterprise from Transfer of Assets was promulgated by the State Administration of Taxation on October 29, 2010 and shall come into force 30 days after promulgation.

Unless otherwise provided, the income of the enterprise from transfer of assets (including various property, equity, creditor’s rights and the like), debt restructuring, acceptance of donation, accounts payable that cannot be paid and the like, no matter in the form of currency or non-currency, shall be calculated in one lump-sum into the revenue year to calculate and pay the enterprise income tax. As to the revenue from the said income from January 1, 2008 to the enforcement of the Announcement that had been equally divided into five-years’ taxable income to calculate each year’s income tax, the remaining taxable income that had not been used to calculate the income tax after the promulgation of the Announcement shall be calculated in one lump-sum into this year’s taxable income to calculate and pay the income tax.

Administrative Measures of the Customs of the People’s Republic of China for Inward and Outward Means of Transport

The Administrative Measures of the Customs of the People’s Republic of China for Inward and Outward Means of Transport (hereinafter “the Measures”) were promulgated by the General Administration of Customs on November 1, 2010 and shall come into force as of January 1, 2011.

The Measures apply to customs administration of inward and outward of transport means that are used for business purpose. As to the administration of inward and outward of transport means that are not used for business purpose, the Measures may be analogically applicable.

Unless otherwise approved by the State Council or the agency authorized by the State Council, the inward and outward of transport means shall enter or leave the border through the place where the Customs Administration of various levels is located, and park the means of transport, load or unload the goods or articles, and load or disembark the passengers at the place that is subject to customs administration. The inward means of transport, after entering the border but before making declaration to the Customs, and the outward means of transport, after completing the customs formalities but before leaving the border, shall move according to the line provided by the competent transport administration; in case of no line provided by the competent transport administration, the line shall be provided by the Customs.

Persons in charge of inward and outward means of transport and enterprises providing inward and outward means of transport services shall be recorded at the customs office directly under the General Administration of Customs or the affiliated customs office that is authorized by the customs office directly under the General Administration of Customs.

As to the supervision of inward means of transport, the person in charge of the inward means of transport shall, within the time requested, notify the customs office (in the form of electronic data) of the destination port in China that is planned to be arrived at, and the time of arrival; before arriving at the place where the customs office locates, the person in charge of the inward means of transport shall notify the customs office of the time when the means of transport enter the border and arrive at the destination port, as well as the place to stop; when the inward means of transport arrives at the place under supervision, the operator of the place under supervision shall notify the customs office; when receiving the declaration of the inward means of transport, the customs office shall examine the electronic data and the declaration documents in paper form. When inspecting the inward and outward means of transport by the customs office, the person in charge of the means of transport shall be on site and open the cabin, room and door according to the requests of the customs office; in case of suspicion of smuggling, the person in charge of the means of transport shall open the place where it is possible to hide the smuggled products and articles, and move the products and materials. As to the supervision from outward aspects, the person in charge of the outward means of transport shall, at least two hours before leaving the place where the customs office locates, notify the customs office of the departure time to the customs office in electronic form. As for the means of transport that needs to leave the border temporarily, the person in charge of the means of transport shall notify the customs of the departure time before leaving the place where the customs office locates.

Decision on Amending the Measures of the Customs of the People’s Republic of China on the Control of Processing Trade Goods (II)

The Decision on Amending the Measures of the Customs of the People’s Republic of China on the Control of Processing Trade Goods (II) is promulgated by the General Administration of Customs on November 1, 2010 and came into force as of December 5, 2010.

This amendment mainly focuses on the following points:

The former provision that “processing trade goods may not be mortgaged, pledged, or placed under lien” has now been revised to “unless otherwise approved by the customs office, processing trade goods may not be mortgaged, pledged, or placed under lien”;

The following provision is newly added: The processing trade enterprise shall manage the processing trade goods and non-processing trade goods separately. The processing trade goods shall be stored at the place registered to the customs office and different materials shall be placed separately. The change of the storage place of the processing trade goods shall be approved by the customs office.

In the event of any of the four circumstances as provided, the enterprise applying to develop outward processing business shall pay the deposit or bank guarantee that equals to the tax that shall be paid from the outward processing goods. The four circumstances include outward processing business in different customs jurisdiction, and all the working process have been outsourced, the goods after outward process will not be delivered back directly for export, and the goods applying for outward process has not involved to any case, but the operating or undertaking enterprise is suspected of smuggling or rule breaking, and the case has been put on file by the customs for investigation and has not been concluded.

Notice of Shenzhen Stock Exchange on Further Regulating the Purchase and Sale of Shares of Listed Company on the Secondary Board by its Director, Supervisor and Senior Managers

The Notice on Further Regulating the Purchase and Sale of Shares of Listed Company on the Secondary Board by its Director, Supervisor and Senior Managers is promulgated by Shenzhen Stock Exchange on November 4, 2010 and came into force on the date of promulgation.

Where the director, supervisor and senior managers of listed companies declare to quit the job within 6 months since the date of initial public offering, they shall not transfer the share of the company directly under their names within 18 months after declaring to quit the job; where the director, supervisor and senior managers of listed companies declare to quit the job within the 7th month to 12th month since the date of initial public offering, they shall not transfer the share of the company directly under their names within 12 months after declaring to quit the job.

Since the date when the listed company files the quit information of its director, supervisor and senior managers to Shenzhen Stock Exchange, the leaving person shall lock the shares he/she holds according to this Notice. The shares added by the leaving person of the company within 6 months since the date of filing the quit information shall be locked too.

Interim Measures of Shanghai Municipality for the Administration of Startup Investment Guidance Funds

The Interim Measures of Shanghai Municipality for the Administration of Startup Investment Guidance Funds is approved and forwarded by the People’s Government of Shanghai Municipality on October 26, 2010 and shall come into force since the date of issuance.

Guidance fund refers to the policy fund set up by the municipal people’s government and operated in the market way. The guidance fund is to exert the leverage effects of public financial funds, and guide the private funds to invest in the industries that are of key development in Shanghai, especially strategic new industries. The major target for investment shall be start-up enterprises that are at infant-time, growing time and other early and medium start-up time, and promote the gathering of good start-up capitals, projects, technologies and talents in Shanghai.

The investment and operation of guidance funds may adopt the way like stock investment in start-up investment enterprise and the following investment thereafter. Besides, it may adopt financing guarantee and other ways according to the actual needs. The concrete requirements are as follows: guidance funds may invest in the stock of start-up investment enterprise, but shall not be the biggest shareholder; guidance funds may invest in start-up enterprises following the start-up investment enterprise, and shall engage the start-up investment enterprise that has common investment therein to manage the equity so obtained; guidance funds may, according to the provisions of the State regarding the debt financing of start-up investment enterprises, provide financing guarantee for qualified start-up investment enterprise when suitable; guidance funds may undertake value-maintenance investment by using spare capitals; guidance funds may also engage in other businesses that are approved by the council of the funds.

The start-up investment enterprise and its managing team that applies for support from the guidance funds shall satisfy the following conditions:

(1) the newly established start-up investment enterprise shall manage an amount of funds that is not less than RMB 200 million Yuan in principle (the newly established start-up investment enterprise that mainly invest in infant-time companies shall manage an amount of funds that is not less than RMB 100 million Yuan in principle), and all the investments shall be paid within 3 years; the first part of investment shall not be less than 30% of the total amount of investment so subscribed; and all the investor shall make the investment in currency; (2) the managing team has good professional ethics and good investment achievements in the past; (3) the start-up investment enterprise that has been supported by guidance funds shall be registered at the competent administration departments to receive the supervision therefrom; (4) having heavy investment in infant time and early and medium start-up time enterprises in such industries that are supported and encouraged by the government, and having special investment areas; (5) the start-up investment enterprises having investment from guidance funds shall first invest in enterprises in Shanghai; (6) having regulated and formal management and investment system, and strict investment procedures and risk control mechanism, and sound financial management system.

Enterprises applying for following the investment shall satisfy another three conditions apart from the aforementioned requirements.